Reduction of working hours and minimum wage rising in US

2 July, 2021

Workers at Amazon
Workers at Amazon

The increase in the minimum wage in both Amazon and Target was accompanied by the reduction of working hours as well as the elimination of both health insurance and bonuses…which meant that workers’ real hourly earnings were actually reduced despite the wage hike. And it’s even worse. In the U.S. economy as a whole, inflation has already eaten into wage growth. And what is coming with the Green Deal is more of the same.

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Table of Contents

Minimum wage hikes and shorter working hours at Amazon or Target

Target workers hired after a reduction in working hours
Target workers hired after a reduction in working hours

In the US, the Fight for 15 movement is gaining media and political presence. Raising the minimum wage to 15 an hour is currently seen as a way to solve the labor shortage, especially in the service sector. Many large companies had already joined the fight for a $15 minimum wage before Biden became President. Even Donald Trump took up that banner and argued that it should apply to those states where the cost of living is higher..

In the labor market what was happening had little to do with rhetoric. Companies like Target or Amazon increased the minimum wage in 2018 and 2020 but at the same time reduced the working hours of both full-time and part-time workers. However, the production targets per team did not change. Amazon workers, like those at Target, are forced to work even faster in less time.

And because the wage increase is accompanied by a reduction in working hours, the result is that their salaries are actually lower than before the wage increase. And since their working day has been so drastically reduced, they end up losing health insurance and other benefits that apply to full-time workers. For example, at Amazon, the minimum wage increase brings with it the elimination of productivity bonus programs. In other words, the drop in income is exacerbated.

To make matters worse, workers at these companies lost not only the right to employment-provided health insurance when they reduced their hours… but but they also lost the right to Medicaid benefits for making too much money (per hour).

That is to say that the generous increase of the minimum wage, combined with reduced hours and internal regulations, is in reality a way to reduce labor costs. These measures not only increase exploitation in relative terms but in absolute terms. It allows employers to force workers to be more productive and to receive less total pay for the same hours worked.

At the same time, companies are then able to brag about how the new conditions allow them to hire more workers and to therefore reduce the level of unemployment.

The alleged labor shortage

June 24, Biden recommends employers offer higher wages if they have trouble finding workers.
June 24, Biden recommends employers offer higher wages if they have trouble finding workers.

It’s not just Amazon and Target. More and more companies, especially in the service sector, are raising hourly wages. They complain that workers would rather receive unemployment benefits than work. They conclude therefore that wages must be raised in order to make them work, as Biden himself suggested to them.

They complain that workers laid off during the lockdown received $600 a week, in addition to the unemployment benefits to which they were entitled. This exceeds the previous weekly earnings of many of the most precarious workers. In fact, it’s what a full-time worker earning $15 an hour would earn.

But that program was eliminated at the end of July last year. A year later, even after mass vaccinations and the reopening of businesses, employers are still complaining about labor shortages, especially in the service industry. Now the employers complain that the American Recovery Plan Act of 2021 didn’t help either because it provided until recently in many states $300 a week unemployment assistance.

That’s why there is no shortage of proposals to overcome the labor shortage… such as providing affordable housing near job centers or making public transportation more efficient and inexpensive. But the most effective way companies have found to attract labor has been to… raise wages.

That’s what we see in big companies like Southwest Airlines, which was losing workers. Even McDonald’s, which has long relied on extremely low wages and a very flexible and disposable workforce, has increased its pay.

Wage hike panic

Minimum wages in constant 2021 dollars are shown in light blue
Minimum wages in constant 2021 dollars are shown in light blue

The Federal Reserve has been the first to lose its nerve over fears of a general wage hike. Phlegmatic secretary of the treasury Janet Yellen jumped the gun by announcing an interest rate hike – which would have partly drained the flow of capital from the Green New Deal – only to retract it almost immediately… upon discovering that inflation… was not such a bad thing for productivity in terms of profit. After all, inflation is eating into wage increases, and the real minimum wage, adjusted for inflation, has fallen significantly and remains well below that of 1968.

But it was not the only one panicking. The press, especially that linked to the Republican party which represents Southern interests that have historically depended on lower labor costs in comparison with the North, proclaims that rising wages are the cause of inflation and that its effect can only be an increase in unemployment.

According to the experts that appear on Fox News, who are as racist and classist as they come, the marginalized minorities, young people and the uneducated working poordon’t deserve” 15 dollars per hour and they are doomed to unemployment if their labor becomes too expensive.

The reality is that the minimum wage has remained stagnant for more than a decade, while inflation has not stopped eroding workers’ wages. The success of U.S. growth (=accumulation) has been based on a steady transfer of income from labor to capital. And we have reached a point where even capitalists realize that the current federal minimum wage is incapable of providing basic subsistence…and that this is not good for business.

But, of course, this doesn’t stop businesses from looking for ways to reduce labor costs after recruiting workers through the promise of a higher wage… after all, the US can’t be left behind and so it can’t sacrifice profits even in the short term. So, at the macro level, even if they have doubts about how to calibrate inflation, everything points to the fact that they will continue to use it as part of a broader strategy to suck income out of labor: the Green New Deal of Biden.

What’s next: unions, New Green Deal and inflation

The unions in the United States, which are characterized by their relative lack of relevance in the institutional and political structure, are gaining strength with the Biden presidency. They are now pinning their hopes on a PRO Act, which will repeal right-to-work laws, that weaken both the ability of unions to expand their influence as well as their capacity to force all workers in a unionized workplace to pay union dues (the main source of union funding in the US) even if they are not part of the union.

On the other hand, unions are promoting the reduction of working hours. One of their arguments is precisely the effect that the Green New Deal will inevitably have on employment. They take for granted the reduction in workers’ purchasing power that this will entail and propose to demand ways to mitigate this loss of wages, such as, for example, offering partial and temporary unemployment benefits or leisure dividends to the unemployed which are similar in logic to the CO2 dividends.

This is also why so much emphasis is placed on the connection between the unions and the Green New Deal. The massive loss of jobs, hours, and real consumption capacity that the Green New Deal entails for workers generates contradictions for US capital itself. The first is that it threatens labor peace. The second is that it will irremediably reduce the consumption capacity of a good part of its own clients,making them much poorer.

Unions are postulated as a means to mitigate both problems, so that the plan can be carried out as smoothly as possible. But no amount of mitigation will resolve the essential contradiction: the objective of the Green Pact is to transfer income from labor to capital in order to revive accumulation… while restricting the internal market.